China Still Drives Rare-Earths Forecast

With China’s 2013 rare earths export quota staying the same, non-Chinese rare earth metals suppliers are struggling to reach their production potential. While Molycorp is reported to be falling short this year, Lynas Corp. has also fallen well short of production goals.

The rare earths company sold just 117 tons of refined product through its recently started Malaysian processing plant in the June quarter, against its target of 11,000 tons for the year.

Prices as a result have gradually eased upwards and, with the backdrop of a recovering global economy and continuing reduction in Chinese illegal exports, are likely to continue to do so next year.

But is Russia also getting on the production bandwagon?

Mother Russia To The Rescue
In an effort to protect Russia’s relatively small high-tech manufacturing industry from further rises and the possibility of supply disruptions, the country is investing $1 billion in a refining facility to come on stream from 2015, according to Reuters.

The new company, a joint venture between two domestic firms, has the Kremlin’s backing and rights to 82,653 tons of monazite concentrate, possibly left over from thorium production at some time in the past.

Russia only consumes about 1,500 tons of REEs per year, although the new firm’s management optimistically predicts this will rise to 6,000 tons by 2020.

The concentrate parcel is said to be good for seven to eight years of production, potentially giving the firm time to identify further resources. The new operation is not seen as an export opportunity as much as a strategic resource for the country, hence the Kremlin’s backing. As such, refined REEs are unlikely to impact global supply beyond the partial replacement of imports.

Rare Earth Price Forecast
With China continuing to be the dominant global supplier, in spite of Molycorp’s successful rise to near production capacity, the extent to which Beijing tightens the noose around the necks of the illegal mining community (figuratively speaking) will determine the future direction of prices.

In all respects, it is in Beijing’s interest to drive this process through to a successful conclusion, so we can assume they will do their utmost to achieve a complete shutdown of illegal operations and smuggling.

That leaves just one direction for prices.

by Stuart Burns